A common misspelling of the word "LMAO" (laughing my ass off). Mostly used by people who cannot spell.
People who make this typo say they are dislexic. When they really are not, and just don't want to look bad/stupid/retarded.
<Me>: Arugh these people are throwing beer bottles outside of my house.
<N00b>: LAMI
<Me>: ...Laughing your ass in? That must be painful.
<N00b>: lol, i hav dislexia lol. i type werong.
<Me>:Uhmmm being dislexic does not mean you can't type on the keyboard, nor do you see spinning letters or anything.
<N00b>:LMAI owned!!!1//1
<Me>: Once again laughing your ass in... and your laughing at yourself.
<N00b>:i hax u be nic 2 me!!!!!!!!!!!!!!!!!!!!!!@!!@//?!
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